Mortgage and Credit Card Companies Under the Spotlight on Consumer Charging

For the first time since May 1996 reports have indicated that wage increases have risen faster than house price inflation. According to Nationwide, "The overall picture remains one of a gently softening market".

The signs indicate that the housing market activity is finally starting to pick up, with estate agents reporting that buyers have begun returning to the market and sellers are more willing to negotiate on prices, however transaction levels are still reported to be low compared with last year. This represents good news for buyers looking to get a property, however it stands in stark contrast to findings from the Council of Mortgage Lenders (CML) showing that the number of homes being repossessed has risen for the first time in seven years, from 3,070 six months ago up to 4,640 for the first half of 2005.

The sharp rise in home repossession applications by lenders adds to growing concerns that consumers are struggling with debt. Ed Stansfield of Capital Economics, said, "Today's figures show that for a small but growing minority of borrowers levels of debt have become a problem, despite historically low interest rates." These figures for repossessions were still, according to the CML, "extremely low" compared with the early 1990s; however adverse credit, arrears and repossessions look set to rise.

Richard Brown, Chief Executive of personal finance comparison site Moneynet is disappointed to recently see, in light of a possible base rate cut, which would help to ease the burden of mortgage debt within the housing market that, "many lenders are taking this opportunity to increase their margins at the expense of their loyal savers by reducing their fixed savings rates by more than the mortgage rates".

The personal debt problems of the nation have also not been helped by the punitive charging activities of several of the major lenders.

The Office of Fair Trading (OFT) has warned eight of the major credit card firms regarding their activities towards customers who miss payment deadlines or exceed credit limits, and ordered them to reduce their "excessive" and "disproportionately high" charges, usually in excess of £20 per transgression, to consumers or face being taken to court.

There are currently 30.6 million people in the UK possessing at least one credit card, with a total of almost £60 billion owed on them.

The credit card firms have defended the need for late payment charges claiming that their use was fair, "Only a very small proportion of customers attract a default charge and as a responsible lender we must have a process in place to manage late payments," a spokeswoman for RBS maintained. Which? have determined that as many as one in four cardholders have been subject to some form of default charge being imposed on them within the past six months. With the number of people accruing charges, the credit firms have admitted they are able to make £400 million a year from default charges alone, and Barclaycard has admitted that 43 per cent of its operating income is generated from these fees.

The OFT have said that the sum being charged by companies is far in excess of the actual costs to the card firms, for late payment. "The levels of the default charges imposed by the credit card companies need to be reduced in order to be fair".

Which? have seen the announcement by the OFT over the credit card penalty charges not being fair, and the threats of court action as, "great news", but also wants other situations where banks hit customers with unfair charges to also be looked into.

The Chief Executive of Money Advice Scotland, Yvonne Gallacher, said of the prospect of reduced credit card fees: "This would make a big difference to the thousands of low-income credit cardholders who struggle to pay off these fees and charges."

Moneynet is not so optimistic for consumers, and advises for caution following the OFT announcement, warning that credit card companies may be looking to increase their profits via alternative 'stealth' charges, "We are concerned that credit card providers may simply attempt to recoup their lost income via higher charges for all?Moneynet recommends credit card customers consider their options before taking out a card -and take into account all charges as well as the headline interest rate", said Richard Brown.

Some moves seem to be getting made to help those most at risk, but these measures seem to be mainly driven by increased levels of consumer dissatisfaction, and while house prices still look expensive compared with incomes, the worst off may not feel a huge change in their circumstances for some time to come.

Resources:

Government - Office of Fair Trading

Mortgage and credit card comparisons - Moneynet

Bio:
Richard lives in Edinburgh, occasionally writing for the personal finance blog Cashzilla, and staring out the office window when he should be working.

New York Magazine

Principal is key to housing solution Winston-Salem Journal, NC - Oct 10, 2008 By Zagros Madjd-Sadjadi The landmark bailout legislation signed by President Bush will not assist one homeowner who is currently making his or her payments ... Video: Obama: 'Taxpayers Shouldn't Pick Up Tab' AssociatedPress McCain's plan for troubled home loans called impractical Newsday Taxpayers, Not Lenders, Would Bear Costs of McCain’s Mortgage Proposal New York Times RTT News all 903 news articles

Bad Credit – Home Mortgage - Refinance and Debt Consolidation Loan ScienceBlog.com, CA - Sep 16, 2008 Based on interest rates, Mortgage Refinance California can be divided into two types namely fixed rate and adjustable rate loan. In the case of a fixed rate ...

Economic Downturn Puts Brakes On Many Major Region Projects TheDay, CT - 2 hours ago The project's $8.6 million construction loan originally came from Dime Bank and appears about to be transferred to New Haven Mortgage Refinance LLC, ...

Help for homeowners Shreveport Times, LA - 6 hours ago Nine states have created mortgage refinance funds to help borrowers avoid foreclosure. Twenty states have partnered with the Homeownership Preservation ...

New London OKs Expansion Of Condo Project TheDay, CT - Oct 10, 2008 But in the past month, contractors released the liens; at least one settlement check was written by New Haven Mortgage Refinance LLC, a company attached to ...

Mortgage refinance boom short-lived Salt Lake Tribune, United States - Sep 17, 2008 A worker paves a sidewalk during construction of a new home in Palo Alto, Calif., on Wednesday. Construction of new homes and apartments fell last month to ...

Is this the right time to refinance? Chicago Tribune, United States - Sep 25, 2008 Mortgage rates are down and you're not going to bother trying to sell your home anytime soon. Should you spend the money to refinance and lower your ...

Killer Startups

FreeHomeRefi.com - Mortgage Refinancing Resources Killer Startups, FL - Oct 10, 2008 ... mortgage refinancing done in a simple way. “Free Home Refi is committed to providing consumers with a home mortgage refinance with no closing costs. ...

Worthy foreclosure rescue? Philadelphia Inquirer, PA - Oct 5, 2008 By Alan J. Heavens The federal government's latest efforts to prevent foreclosures are getting a lukewarm response from economists, officials and advocacy ...

Fed: Bailout will help borrowers Newsday, NY - Sep 18, 2008 The government's takeover of mortgage finance companies Fannie Mae and Freddie Mac should provide an opportunity to modify more home loans for troubled ...